FOODSERVICE

Review of the Russian Market of Juices

Research by the Company “AnalyticResearchGroup”

Output of juice products in Russia has been steadily decreasing during the past few years: since 2011, the volume of fruit and vegetable juice output has been demonstrating a decline almost every year, with the exception of slight growth in 2013 and 2014 – +3.4% and +0.2% respectively against the indicators of the previous year.

Statistics show that in 2017 the market shrank by almost a third: Russian companies produced 1.1 billion standard cans of juices, which is 30.6% lower than the volume in 2016. It is expected that in 2018, the decline in production volume within the category will slow down, amounting to around 2.4%.

The drop in output volumes in the juice market has a number of reasons. The primary reason is the decline in purchasing power observed in consumers in the past few crisis years. Market participants report that consumers are prone to make juice purchases more rarely, switching to more affordable substitutes, such as lemonades or carbonated water. Increasing raw material costs, caused by exchange rate jumps, also have a negative impact on juice production volumes. Since a significant share of raw materials for juice production is supplied to Russia from abroad, the weakening of the Russian ruble led to an increase in costs in the industry. Another important factor is the fact that juices have gained the status of an unhealthy product in recent years, which results in a decline in their consumption. Factors affecting the market positively include the launch of new production facilities. Among new projects by major market players, the launch of new production lines at one of “Coca-Cola”’s factories is to be highlighted – the facility is located in Saint Petersburg and produces juices and nectars (“Dobry (Kind)” and “Moya Semya (My Family)” trademarks). The capacity of the new lines equals 70 million packages per year; more than 170 million rubles were invested in the project.

Regarding the monthly dynamics of fruit and vegetable juice production volumes for the period from January 2017 to March 2018, the peak in output fell on autumn months, quite expectedly, whereas lower production volumes were typical for the period from late winter to early summer.

All in all, during these 15 months, the production indicator for the juice industry was changing in the range between 137,356.1 thousand standard cans in October 2017 and 59,671.5 thousand cans in February 2018. In March 2018, Russian factories produced 76,171.9 thousand standard cans of juices from fruit and vegetables. This is one quarter (27.7%) higher than the month before, although a slight decline was observed compared with March 2017, when the volume of juices produced in Russia was 1.3% higher.

In 2017, the Southern Federal District produced the most fruit and vegetable juices, accounting for 43% of the total production volume. The share of 33.5% was occupied by the Volga Federal District, whereas the Central Federal District was third with the share of 11.7%. The share of the Siberian Federal District equaled 7.6% in 2017, whereas the remaining federal districts occupied less than 5% total in the structure.

The analysis of production dynamics by juice type reveals that in most product categories, output volumes have been declining in recent years, and in 2017 manufacturers demonstrated a reduction in output across all main juice varieties.

The most popular product category, namely apple juice, suffered the least: the production volume thereof during the year dropped by 39.6%, amounting to 454,329.2 thousand standard cans in 2017. Negative trends were more apparent in other categories – for instance, production of tomato juice, which had been steadily growing for three years, dropped by 36.4% in 2016 and plummeted by 55.4% in 2017. The most significant negative dynamics in 2017 were demonstrated by grapefruit juice, production volumes of which in Russia during the year were 82.4% lower than the year before.

At the same time, imports of juices in 2017 only decreased in a few categories, e.g. by 4.5% in the category of apple juice and by 7.8% in the category of orange juice. Statistical data indicate that the volume of supplies of grapefruit, tomato and grape juice has increased, whereas the most pronounced dynamics were demonstrated by pineapple juice (+38.5%) and other juice varieties (+63.8%), which include juices from cranberry, pear, tropical fruit, cherry and other raw materials.

The reduction of the citrus juice market has been occurring against the backdrop of declining consumption observed in different countries of the world. The decline in imports into Russia was directly contributed to by the drop in orange harvest in Brazil and a number of other countries.

According to Alexey Markov, Commercial Director at “Lenmix”, an importer of premium foods and drinks, a decrease in demand for imported apple and orange juices has been observed, as these flavors are widely supplied by Russian manufacturers. Juices with exotic flavors now constitute a promising niche in the Russian market – these include juices from blackberry, kiwi, pineapple, grapefruit, pear, vegetable mixes etc. Certain foreign manufacturers go further, developing exclusive juice varieties for the Russian consumer, which also spark demand.

In 2017, the volume of juice imports into Russia in value terms amounted to $ 303,359.6 thousand, which is 5.8% higher than in 2016. Exports in monetary terms increased more significantly during the year – by 15.3% – and amounted to $ 35,046.3 thousand. The volume of imports in 2017 was 8.7 times higher than the volume of exports.

The gap was less dramatic in physical terms – the volume of imports was 3.7 times higher than exports. The volume of juice imports into Russia increased by 4.2% over the year, amounting to 192,152 tonnes in 2017, whereas the volume of exports demonstrated similar growth, reaching 52,344.9 tonnes.

The drop in imports in 2015, followed by growth during the two years of 2016 and 2017, is the main trend. In monetary terms, exports reached their minimum value in 2016 ($ 30,387.3 thousand), whereas in physical terms they were remaining at approximately the same level throughout 2015–2017.

In 2018, a slight decline in volumes of juice imports and moderate growth of exports are forecasted. Imports of fruit and vegetable juices this year are expected to reach 165,597.8 tonnes, whereas exports are expected to amount to 56,278.5 tonnes.

In 2017, apple juice was occupying the largest shares in the structure of juice imports in both physical and monetary terms – 28.7 and 45.8% respectively. The absolute leader in apple juice supplies to Russia was China, which imported 52,286 tonnes of juice of this variety at $ 50,402.1 thousand into the country during the year. The top 5 countries in imports in monetary terms also included Poland, Uzbekistan, Belarus, and Iran.

Orange juice is another popular category, imports of which had the share of 28% in supplies in US dollars and the share of 18% in supplies in tonnes.

Significant shares of imports are occupied by juice mixes (the share of this category accounts for 11.7 and 9.5% in value and volume terms respectively) as well as grape juice (6.7 and 7.6% respectively).

Just like in imports, apple juice was occupying the largest shares in the structure of exports in 2017 in both monetary and physical terms – 30.3 and 31.3% respectively. The largest volumes thereof are supplied to Kazakhstan and Belarus. Juice mixes were second in popularity; the leaders also included the segment of other juices, which includes goods produced from cranberry, pear, tropical fruit, cherry and other fruit.

Significant shares belong to tomato juice – 9 and 12.5% respectively in value and volume terms. Orange juice has similar volumes of supplies – 10.5% in monetary terms and 8.9% in physical terms. Juices from grapes, grapefruit and pineapple are exported the least.

All in all, despite a number of positive trends, negative factors (problems with the raw material base, unstable currency exchange rates, and declining consumer purchasing power) have been having a significant impact on the Russian juice industry. Unlike the data by the Russian Federal State Statistics Service (Rosstat), according to which production of juices in 2017 dropped by almost a third, the Russian Union of Juice Producers reported a less significant decline in the market as a whole (-1.95%, to 2,287 million liters). Lower decline rates were achieved largely through market players’ activities, such as active promotion of goods and trademarks as well as expansion of product ranges. Assuming that negative trends will continue, these steps will remain relevant for development in the market in 2018.